Depending on direct: Discipline grows to $161B

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[Atlanta] more than 10,000 executives descended upon the Georgia World Congress Center last week for the Direct Marketing Association's annual convention amid heady times for the discipline, but attendees were warned the threat of regulation could dampen expectations in the future.

Currently, marketers are on track to plow $161.3 billion into direct-marketing channels in 2005, up from $149.3 billion in 2004, according to recently released figures from the DMA, as they eschew mass media in favor of one-to-one communications. Spending on direct marketing is forecast to grow by 6% annually from 2004-09 compared to 2.4% growth from 1999 to 2004. Direct, moreover, accounted for a whopping 47.9% of total ad spending in 2004, up a full point from 1999, according to the DMA.

"Direct marketing lies at the core of marketing today and is the future of marketing tomorrow," the trade group's president-CEO, John A. Greco, said in his kickoff address.

But if anything darkened the mood, it was the potential threat of a regulatory crackdown on the use of consumer information-even as marketers get more sophisticated in how to use that data.

"With each new data security breach and each new headline, we move a step closer to government intervention in the form of potential legislation," Mr. Greco said in his address. "The progress of direct marketing could be significantly derailed if legislation needlessly cuts marketers off from the data that feeds the direct-marketing process."

Mr. Greco said that on a "case-by-case basis" the DMA "may support legislation we believe will improve the marketplace and build consumer trust."

With an eye toward these concerns, the DMA announced a policy that calls on all DMA members to authenticate their e-mail, a step toward preventing e-mail fraud. The DMA also is developing a public image campaign to emphasize the convenience of direct and portray it as safe.

Image campaign

The public image campaign, which will have elements aimed at both businesses and consumers, will encompass advertising as well as public relations. The effort will be launched in the coming months. Mr. Greco didn't provide details.

The DMA is working with Burson-Marsteller, Landor Associates and Wunderman, all part of WPP Group, on the public image effort.

There's no question companies increasingly depend on direct. Karen Menachof, group supervisor at Catalyst Direct in Rochester, N.Y., has seen this trend play out with her Fortune 500 clients. "It's a reallocation of marketing dollars," she said, and "it's going to grow."

Shifts are taking place within the discipline. In the next five years, expenditures on Internet marketing (defined as search marketing, banner advertising, cost-per-lead programs and co-registration programs and/or tiered marketing programs including affiliates) along with commercial e-mail are forecast to grow at least three times faster - at 18% and 19%, respectively - than other direct media. Spending on Internet marketing is forecast to reach $21.7 billion in 2009, up from $12.6 billion in 2005. Commercial e-mail spending is slated to hit $600 million, up from $300 million.

The Internet's importance has increased drastically for office supply company Quill Corp. over the last five years, said Jim Layer, creative services manager. Online now represents 55% of sales, up from 10% five years ago.

The DMA's agenda recognized the shift, with sessions devoted to topics ranging from e-mail marketing to search.

Being direct

Direct is big, getting bigger

$161.3 billion

Total direct expenditures for 2005

$83.9 billion

Consumer direct spending

$77.4 billion

Business- to-business spending

47.9%

Direct’s share of total ad spending (2004)

2.4%

Direct’s annual growth rate ‘99-’04

6%

Forecast growth rate ‘04-’09

Source: Direct Marketing Association

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